BRIAN LENIHAN faced the greatest challenge to confront any finance minister since the foundation of the State in the introduction of his first budget yesterday.
He faced a recession at home, which could be of two years duration, with a deteriorating outlook abroad with the fallout from the financial and banking crisis. No wonder that, in the confluence of these unprecedented events, he recalled his father's advice to always look after what he called "the little people".
Apocalyptic forewarnings had the public braced for the worst. The tax increases ranged from old reliables to manifestly unfair levies while on the spending side hard choices were dodged. It is beyond comprehension that a minister for finance - in a crisis situation for public finances - would kick public service reform into the long grass. The benchmarking bonanza continues unchecked.
Mr Lenihan is to be commended for increasing the old age pension by €7 a week and the carer's allowance by €6.50. In addition, the increase in the fuel allowance is substantial and wholly justified. There can be no disagreement with the introduction of the charge on the non-principal home and it is appropriate that the revenue should flow to the local authorities. The increases on cigarettes and wine are modest and were to be expected.
Given the extent to which oil prices have increased and the unpredictability of that market, it might have been preferable not to increase the tax on petrol. The travel trade will fume but the departure charge of €10 is not unreasonable in the circumstances. Mr Lenihan deserves credit for maintaining a significant capital expenditure programme.
Two years ago, the then minister for finance, Brian Cowen, reduced the top rate of income tax from 42 per cent (which was lower than the State could afford) to 41 per cent. The flawed assumption was that the huge increase in asset taxes such as stamp duty on property transactions could be relied upon to continue indefinitely. If not, of course, a solution could be found, once the general election was won.
The solution is a levy of 1 per cent and 2 per cent; a tax increase accompanied by a juvenile exercise in semantics which calls it something else. It will bring in over €1 billion in a full year. But this levy is to be waged on all incomes other than welfare. Persons bringing home the minimum industrial wage will have to pay up. Persons whose income is so low that they don't fall into the tax net - and don't deserve to - will now do so. There was an expectation that the child allowance would be taxed or means-tested. Instead, it is to be halved and then abolished for 18-year-olds and over. Lower income parents who hoped to send their children on to further education will have the rug pulled from under them. Has this Government no sense of fairness?
This is a severe budget, especially for the lower and middle-income groups. By resorting to borrowing and postponing hard decisions, Mr Lenihan has increased the chances of an equally harsh budget next year.